Oracle surpasses IBM to become the world's second-largest software company by revenue
On Wednesday this week, IBM announced its financial results for the third quarter of 2013. The report showed that in this quarter, IBM's net profit was $4 billion, up 6% year-on-year; total revenue was $27.3 billion, down 4% year-on-year. Due to revenue falling short of analysts' expectations, the company's stock price plummeted significantly after the market closed on the same day. Additionally, due to a reduction in the scale of IBM's software business, it had no choice but to cede the position of the world's second-largest software company by revenue to another software giant, Oracle.
On Thursday evening, Oracle issued an announcement stating that the company is the world's second-largest software company by revenue. Oracle wrote as follows: "In light of IBM's recent quarterly performance, we would like to take this opportunity to clarify that Oracle's software business is growing faster than IBM's software business. Oracle has now become the world's second-largest software company, while IBM has slipped to third place. In the past four quarters, IBM's total software revenue was $25.7 billion, whereas Oracle's total software revenue during the same period was $27.8 billion."
It should be noted that the world's largest software company by revenue is Microsoft, which generated nearly $78 billion in software revenue in the most recent fiscal year. For Oracle to surpass Microsoft, its revenue would need to increase by nearly three times.
In its earnings report released on Wednesday, IBM stated that due to exchange rate fluctuations, the growth of its software business in the third quarter was only 2%. Most software products, such as WebSphere, only showed slight growth. IBM's Chief Financial Officer (CFO), Mark Loughridge, promised during a subsequent conference call to "expand the software business" and achieve "double-digit" profit growth.
In contrast, Oracle's recently announced first-quarter financial results for the 2014 fiscal year showed that Oracle's software revenue was $6.084 billion, up 6% year-on-year; new software and cloud software subscription license revenue was $1.653 billion, up 5% year-on-year; software license updates and product support revenue was $4.431 billion, up 7% year-on-year.
However, it will take IBM's software business a longer time to show its own highlights. On Thursday, analyst Toni Sacconagi from U.S. investment firm Sanford C. Bernstein & Co issued a report to clients indicating that due to the decline in IBM's hardware business performance, with Unix server sales dropping by 18% and storage device sales dropping by 11%, he expects IBM's software business to generate more profits for the company.